[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
ILLICIT USE OF VIRTUAL CURRENCY
AND THE LAW ENFORCEMENT RESPONSE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TERRORISM
AND ILLICIT FINANCE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JUNE 20, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-102
[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]
________
U.S. GOVERNMENT PUBLISHING OFFICE
31-491PDF WASHINGTON: 2019
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannon McGahn, Staff Director
Subcommittee on Terrorism and Illicit Finance
STEVAN PEARCE, New Mexico Chairman
ROBERT PITTENGER, North Carolina, ED PERLMUTTER, Colorado, Ranking
Vice Chairman Member
KEITH J. ROTHFUS, Pennsylvania CAROLYN B. MALONEY, New York
LUKE MESSER, Indiana JAMES A. HIMES, Connecticut
SCOTT TIPTON, Colorado BILL FOSTER, Illinois
ROGER WILLIAMS, Texas DANIEL T. KILDEE, Michigan
BRUCE POLIQUIN, Maine JOHN K. DELANEY, Maryland
MIA LOVE, Utah KYRSTEN SINEMA, Arizona
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York RUBEN KIHUEN, Nevada
WARREN DAVIDSON, Ohio STEPHEN F. LYNCH, Massachusetts
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
C O N T E N T S
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Page
Hearing held on:
June 20, 2018................................................ 1
Appendix:
June 20, 2018................................................ 33
WITNESSES
Wednesday, June 20, 2018
Nevano, Gregory, Deputy Assistant Director, Illicit Trade,
Travel, and Finance Division, Homeland Security Investigations. 5
Novy, Robert, Deputy Assistant Director, Office of
Investigations, United States Secret Service................... 7
Ott, Thomas, Associate Director, Enforcement Division, Financial
Crimes Enforcement Network..................................... 9
APPENDIX
Prepared statements:
Nevano, Gregory.............................................. 34
Novy, Robert................................................. 41
Ott, Thomas.................................................. 48
Additional Material Submitted for the Record
Pearce, Hon. Stevan:
Written statement from Steven D'Antuono...................... 55
Ott, Thomas:
Written responses to questions for the record from
Representative Sinema...................................... 63
ILLICIT USE OF VIRTUAL CURRENCY
AND THE LAW ENFORCEMENT RESPONSE
----------
Wednesday, June 20, 2018
U.S. House of Representatives,
Subcommittee on Terrorism
and Illicit Finance,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:04 p.m., in
room 2128, Rayburn House Office Building, Hon. Stevan Pearce
[chairman of the subcommittee] presiding.
Present: Representatives Pearce, Pittenger, Tipton,
Poliquin, Zeldin, Davidson, Budd, Maloney, Himes, Foster,
Delaney, Sinema, Vargas, Gottheimer, and Waters.
Also present: Representatives Scott, Velazquez, Crist,
Heck, and Capuano.
Chairman Pearce. The subcommittee will come to order.
Without objection, the Chair is authorized to declare a recess
with the subcommittee at any time. Members of the full
committee who are not Members of the Subcommittee on Terrorism
and Illicit Finance may participate in today's hearing. All
Members will have 5 legislative days within which to submit
extraneous materials to the Chair for inclusion in the record.
This hearing is entitled, ``Illicit Use of Virtual Currency
and the Law Enforcement Response.'' I now recognize myself for
3 minutes to give an opening statement.
I want to thank everyone for joining us today. Today's
hearing is going to examine the exploitation of virtual
currencies and how law enforcement is working to identify and
disrupt their use to fund illicit activities through both
mainstream and dark Web marketplaces. With today's advancements
in the evolving world of financial technology, the ability to
deposit, transfer, and raise money is at our fingertips. While
this is a significant improvement for those who struggle to
access the financial system, the ease of transacting also opens
the doorway for abuse by bad actors.
The appeal of virtual currencies to criminals is their
ability to transact across the globe and the low cost of
resolution. Virtual currencies are also well known for being
the preferred means to purchase drugs, illicit goods, and
criminal services from online forums on the dark Web, including
places like the Silk Road and AlphaBay. There is also anecdotal
evidence of terrorist groups transferring money and attempting
to raise funds using virtual currencies.
Moving forward, as this technology becomes cheaper and more
prevalent globally, we must be aware of the risks, the abuse of
the virtual currencies can pose to our financial system,
criminal groups infect computers and networks with ransomware
and ask for payments in virtual currency or use online
marketplaces to buy, sell, and advertise illicit goods and
services.
As Members of Congress, we should work to remain as
informed as possible about the current and emerging risks
around us. And in fact, Members of this subcommittee have
already been active in this arena. Last week, I was happy to
speak in support of the FIND Trafficking Act, a bill that would
require the Government Accountability Office to study and
report how virtual currencies in online marketplaces can be
used for illicit means. This bill is a first step in defining
the issues surrounding virtual currency exploitation, as well
as creating solutions to help law enforcement and protect our
citizens.
I also applaud Congressman Ted Budd for introducing the
Financial Technology Protection Act earlier this year, which
would bring industry insiders and Federal regulators together
to find best practices and solutions to help our law
enforcement solve this problem.
Today's hearing is an opportunity to learn more about law
enforcement's investigations and responses to the illicit use
of virtual currencies. I hope our Members will take this chance
to learn from our witnesses about the current issues facing law
enforcement in the detection of criminal activity in this area
and explore what additional tools may be necessary to combat
threats to the U.S. financial system. We would also like to
thank our witnesses for being here today. I look forward to
your testimony.
I would now recognize Mr. Foster for 5 minutes.
Mr. Foster. Thank you, Chairman Pearce and thank you to our
witnesses here.
The illicit use of virtual currency is a very important
topic. And under normal circumstances, I would say that it
deserves our full attention. However, there are extraordinary
circumstances today. Hundreds of children are sitting in cages
who have been forcibly separated from their families. And so, I
think this is really the issue that is more pressing to
discuss.
Mr. Nevano, as the highest ranking ICE (U.S. Immigration
and Customs Enforcement) official who is being allowed to
testify before Congress, we Democrats have some questions that
we will be asking you. Just last month, ICE agents rounded up
and incarcerated immigrants, as well as people who simply
appeared to look like immigrants to them, in and around my
district in Illinois and without any apparent cause or reason
and uncertain attention paid to adequate rules and procedures.
On our southern border, ICE agents are ripping children out
of their parents' arms. We don't need a new law to put an end
to this trauma and the President could very easily have put a
stop to any of these policies with one phone call a week ago or
simply never have put these policies in place at all. Instead,
he chose to manufacture a humanitarian crisis that was
unnecessary and easily preventable.
The United States has served as a beacon of hope and
freedom since its founding. We are watching that hope and
freedom erode right before our eyes as thousands of these
children spend another night in a metal cage.
Mr. Nevano, history does not look kindly on our government
when we do not uphold our commitment to human rights and basic
morality. I strongly believe that the American people deserve a
government that embodies the values on which it was founded. We
look forward to your testimony and the answers that you will be
providing to this committee.
Thank you. I yield back.
Chairman Pearce. I now recognize the gentleman from North
Carolina, Mr. Pittenger, for 2-1/2 minutes.
Mr. Pittenger. Thank you, Mr. Chairman and Ranking Member
Perlmutter for your leadership and holding this hearing today.
Additionally, I would also like to thank our distinguished
panelists for lending their expertise to our subcommittee this
afternoon. Of special note is Financial Services intern and UVA
student, Hugo Bonilla, for his exceptional research on virtual
currencies.
One of the greatest emerging threats to U.S. national
security is illicit use of virtual or cryptocurrencies.
Domestic and international law enforcement agencies have begun
taking the steps necessary to combat this new model of criminal
transactions. It is our duty to provide the tools and the
oversight of said tools required to maintain our edge over our
adversaries.
Virtual currency, due to its higher degree of anonymity, is
seen as a very lucrative opportunity for those with nefarious
intentions. The risk that arises from this anonymity is that
criminals can use virtual currencies to store and transmit
their financial gains from illegal practices such as drug
dealing or human trafficking. Under the guidance of the
Department of Homeland Security (DHS), the Secret Service, and
the National Computer Forensics Institute, they provided our
State and local law enforcement personnel with the training
necessary to investigate and combat cyber crime, including the
illicit use of virtual currency. And issues like these must be
continued and expanded by Congress to combat this emerging
threat.
I have hosted a dozen parliamentary intelligence security
forums over the last 5 years in which delegates from 68 nations
have met to address issues such as this. The United States must
continue acting as a global leader in the realm of
cybersecurity. It is my hope that today we can thoroughly
examine this threat to determine what additional tools and
resources we need to combat it.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Chairman Pearce. The gentleman yields back.
The Chair would now recognize the gentlelady from
California, Ms. Waters, for 3 minutes.
Ms. Waters. Thank you very much. Thank you for scheduling
today's hearing to examine the illicit uses of virtual currency
and the law enforcement response. It is alarming how virtual
currencies, especially newer ones, are being used to finance
terrorism, launder money, and purchase drugs and weapons on the
dark Web.
This is an important topic. However, it is not the only
topic that we must discuss today. Despite the fact that the
witness from the Department of Homeland Security works for U.S.
Immigration and Customs Enforcement, commonly known as ICE, and
is not the agency tasked with working on the border, it would
be a dereliction of duty if I did not share my concerns about
the human rights abuses occurring on our border at President
Trump's direction and at least find out what ICE's role is in
this issue.
The world has watched and listened in horror and with
overwhelming sadness as children have been ripped from their
parents and separated from their families. They are young,
alone, and terrified without their families and made to live in
literal cages. It is not clear when this child abuse will end.
The White House has made every argument it can to deflect
the blame for their zero tolerance policy that led to the
forcible separation of over 2,000 children from their parents
in just 6 weeks. They have quoted the Bible, denied the policy,
and begrudgingly acknowledged it. The President, in an attempt
to convince the American public that up is down and down is up,
even tried to blame Democrats for his own policy.
This is Donald Trump's abhorrent policy. This is child
abuse. Neither of those statements is refutable. It is time for
the President, Department of Homeland Security Secretary
Nielsen, and Department of Justice Attorney General Sessions to
admit that their actions were not thought out and that the
consequences of those actions are inhumane and completely
inconsistent with the values of this country.
And I am hoping that during the period where we can raise
some questions that you will be able to help us understand what
your role is. And with that, I yield back the balance of my
time.
Chairman Pearce. The gentlelady yields back.
The Chair now welcomes the testimony of our two witnesses.
The third is stuck in traffic reportedly somewhere on New York.
I am assuming that is the avenue, not the city. But we will
introduce Mr. Ott when he comes. He is representing FinCEN here
today.
Mr. Robert Novy is a Deputy Assistant Director of the
United States Secret Service Office of Investigations with
oversight of criminal investigations, operations, strategy, and
policy related to cyber and financial crimes. Mr. Novy was
detailed with the staff of the National Security Council at the
White House as the Director for Cyber Security Incident
Response, Intelligence, and Defense Policy and was the deputy
assistant director for the Congressional Affairs and special
agent in charge for public affairs.
Mr. Novy has previously served as the supervisor of the
Electronic Crimes Task Force in the New York Field Office and
was a member of the Washington Field Office's Electronic Crimes
Special Agent Program. In addition to his expertise on cyber
crime, Mr. Novy served on the Presidential Protective Division
during both the Clinton and Bush Administrations. Prior to his
Secret Service career, Mr. Novy was an assistant branch chief
for the U.S. Securities and Exchange Commission (SEC), also
served in the U.S. Navy.
Mr. Novy received his Masters of Public Administration from
Troy State University and serves on the Board of Advisers for
the University of Texas in Austin.
Mr. Gregory Nevano is a Deputy Assistant Director at
Homeland Security Investigations Illicit Trade, Travel, and
Finance Division with oversight of all financial, narcotics,
document and benefit fraud, criminal gang exploitation, and
several targeting infusion centers. Previously, Mr. Nevano
served as the chief of staff to the deputy director of the U.S.
Immigration Customs and Enforcement, ICE, as the associate
deputy assistant director for the Investigative Services
Division and is the unit chief for the Asset Forfeiture Unit.
Mr. Nevano's long career also included assignments as an
assistant special agent in charge in the ICE Boston Field
Office, the group supervisor of the Narcotics and Violent Gang
Group--or group supervisor of the Operational Support Group as
a detailee to the FBI's Joint Terrorism Task Force. Mr. Nevano
received his Bachelors of Science in political science from
Boston College.
We will go ahead and introduce Mr. Ott and we will then
just move into his testimony when he comes. But he is the
Associate Director for the Financial Crimes Enforcement Network
or FinCEN's Enforcement Division with oversight of the FinCEN
Bank Secrecy Act (BSA) Compliance and Enforcement Program. Mr.
Ott joined FinCEN in 2014 as a senior adviser to the director
and was responsible for providing guidance on various matters
regarding law enforcement and transnational crime.
Prior to joining FinCEN, Mr. Ott was a prosecutor for over
25 years with both the Tax and Criminal Divisions of the United
States Department of Justice, most recently serving for 8 years
as deputy chief of the Organized Crime and Racketeering
Section. Throughout Mr. Ott's career with the DOJ, he
prosecuted and supervised prosecutions of cases involving RICO,
public corruption, national security, tax evasion, financial
fraud, and money laundering. Mr. Ott received his juris
doctorate degree from the University of Baltimore School of
Law.
Each of you will now be recognized for 5 minutes to give an
oral presentation of your testimony. Without objection, each of
your written statements will be made part of the record.
Mr. Nevano, you are recognized for 5 minutes.
STATEMENT OF GREGORY NEVANO
Mr. Nevano. Chairman Pearce, Ranking Member Perlmutter,
distinguished Members, and my fellow law enforcement
colleagues, thank you for the opportunity to appear before you
today to discuss the use of virtual currency and the efforts of
U.S. Immigration and Customs Enforcement to target and
investigate those who exploit virtual currency to carry out
nefarious activity.
ICE's Homeland Security Investigations (HSI) has long stood
at the forefront of combating transnational criminal activity
that seeks to exploit our trade, travel, and financial systems
for illicit purposes. HSI is the largest investigative agency
within the U.S. Department of Homeland Security with more than
6,000 special agents assigned to more than 200 domestic offices
and 67 international offices in 50 countries. HSI has the
authority to enforce more than 400 U.S. Federal statutes to
include financial crimes and the use of virtual currency.
Virtual currency is not a new phenomenon. Virtual currency,
in the form of airline mileage reward programs, has been in
existence since the early 1980's. The challenge for law
enforcement; however, began in 2009, when Bitcoin was
introduced as the first decentralized virtual currency. With
its introduction, an entirely new world was created in relation
to money laundering and financial investigations. Following its
introduction, Bitcoin quickly became the currency of choice on
the dark Net as buyers and sellers enjoyed the pseudo-anonymity
it provided.
The good news for law enforcement; however, is that despite
the pseudo-anonymity exploited by the use of Bitcoin and other
virtual currencies, as well as their ease to transfer at some
point, criminals need to convert their cash into virtual
currency or their virtual currency into cash. Whenever monetary
exchanges are made, a choke point is created. This is the time
when criminals are most vulnerable and can be identified by law
enforcement means and methods.
Utilizing the traditional investigative methods coupled
with financial and blockchain analysis, HSI is able to disrupt
and dismantle the criminals and the TCOs utilizing virtual
currencies. Legitimate users of virtual currencies are more
than willing to conduct business with a legitimate virtual
currency exchange. Legitimate exchanges are registered with the
U.S. Department of Treasury's Finance Crimes Enforcement
Network also known as FinCEN.
FinCEN issued guidance in 2013 identifying persons or
companies involved in the exchange of virtual currency as money
service businesses, requiring them to follow regulatory and
reporting protocols. Those who use virtual currency for illegal
purposes; however, more often than not stay away from
registered exchanges in an attempt to conceal their own
identities. Instead, these criminals look to illicit or
unregistered peer-to-peer exchanges that don't require or ask
for personal identifying information. They illegally generate
revenue by charging a premium for allowing their customers to
remain anonymous. They will sell cryptocurrencies above market
value and buy below market value from those customers who wish
to remain anonymous.
As part of the commitment to combating the opioid crisis in
the United States, HSI has engaged in a multiyear effort to
increase its cyber-enabled workforce by training employees to
conduct online investigations. Additionally, HSI has conducted
virtual currency and dark Net training for Federal, State,
local, tribal, and international partners. In Fiscal Year 2018,
HSI has conducted more than 50 outreach and training sessions
both nationally and internationally reaching over 4,000 law
enforcement partners.
HSI not only collaborates with fellow law enforcement
agencies, we also understand the importance of partnering with
the private industry. We expanded the focus of Operation
Cornerstone which was created in 2003, with a primary focus and
goal of detecting and closing vulnerabilities within the U.S.
financial, trade, and transportation sectors. With the rapid
growth of virtual currency and with the expansion of private
companies involved in virtual currency, HSI has expanded
Operation Cornerstone to include private industry involved in
the virtual currency space.
HSI's increased commitment to conducting virtual currency
investigations has steadily increased as evidenced by our
increase in training and collaboration. In Fiscal Year 2011,
HSI initiated only one investigation of virtual currency.
However, by 2017, we initiated 203. As of May 2018, HSI has
already initiated 144 virtual currency investigations. With the
increase in our investigations, HSI has also seen a large
increase in our seizures.
For example, in FY 2014, HSI seized 150,000 in virtual
currency. However, by the end of Fiscal Year 2017, we seized
nearly 7 million in virtual currency. And right now, in this
Fiscal Year through April 2018, HSI has already seized more
than 25 million in virtual currency. Technology will inevitably
continue to evolve and law enforcement agencies everywhere must
continue to adapt and evolve as well. HSI will continue to
partner with all law enforcement agencies along with cutting-
edge technology partners.
In closing, I appreciate your interest in the bourgeoning
field of virtual currency and thank you again for the
opportunity to appear before you today. I look forward to
answering any of your questions.
[The prepared statement of Mr. Nevano can be found on page
34 of the Appendix.]
Chairman Pearce. Thank you.
Mr. Novy, you are recognized for 5 minutes.
STATEMENT OF ROBERT NOVY
Mr. Novy. Chairman Pearce, Ranking Member Perlmutter, and
Members of the subcommittee, thank you for allowing me to
testify today.
The challenge of the illicit use of digital currency spans
across sectors of industry and areas of criminal law. As such,
the response necessarily requires a whole of government
approach. That is why I am so pleased to be here today with two
of our partners from FinCEN and ICE. I would like to commend
them for their important work and for continuing their
productive partnership with us at the United States Secret
Service.
At its most basic level, the challenge of digital
currencies mirror those challenges faced by the broader
financial system. The key to success in countering crime is to
identify the beneficiary of the crime. So, that is why we
follow the money. This rule has held true for thousands of
years and continues for crimes in cyberspace and crimes
involving digital currencies.
As one of the Nation's original investigative agencies, the
United States Secret Service has, for over 150 years, conducted
criminal investigations to protect the American public,
financial institutions, and critical infrastructure from
criminal exploitation. In 1982, the Secretary of Treasury
directed us to investigate crimes related to electronic funds
transfer. Two years later in 1984, Congress passed legislation
to expand the Secret Service's responsibilities to include
investigating a range of computer hacking and access device
violations. And today, we have extensive authorities to
safeguard financial and payment systems from criminal
exploitation, especially from those enabled by the Internet.
To perform our mission, the United States Secret Service
has long kept pace with new technologies used by the financial
sector. Accordingly, over the past 30 years, we have
successfully investigated and arrested some of the world's most
significant and most sophisticated cyber criminals. Today, with
respect to digital currencies, our primary focus is around
three core areas: No. 1, criminal schemes that undermine the
integrity of the financial systems; No. 2, money laundering;
and, No. 3, fraud schemes that include computer access device,
identity theft, and other forms of fraud.
Over the past decade, working with our law enforcement
partners here and around the world, we have investigated and
shut down two major centralized digital currencies, both of
which supported extensive criminal activity: eGold in 2007 and
Liberty Reserve in 2013. The Secret Service continues to work
on a range of investigations involving digital currencies. A
few of these cases are referenced in my written testimony.
Let me stress, there are real and legitimate commercial
applications for digital currencies. That said, in recent
years, some digital currencies have been widely adopted for
illicit purposes. For example, eGold and Liberty Reserve, two
centralized digital currencies, were used: a) to purchase
illicit goods and services such as drugs, credit card
information, personally identifiable information, child
pornography, and a range of criminal services; and, b) to
launder illicit proceeds particularly as a means of
facilitating overseas money transfers.
More recently, the growing use of decentralized digital
currencies such as Bitcoin has enabled additional criminal
activities. These include: Cryptojacking, which is the use of
malware or compromised websites to hijack the computing power
of others to obtain cryptocurrencies through mining; the theft
of crypto assets directly, generally by targeting the private
encryption keys of users; ransomware in which digital
currencies are demanded as part of an extortion scheme; and
attacks on the blockchain networks themselves.
As these decentralized currencies proliferate and evolve,
new risks are emerging. Criminals are increasingly leveraging
anonymity-enhanced currencies and services such as
cryptocurrency tumblers and mixers to obscure transactions on
the blockchain. In order to counter all these diverse illicit
activities, effective law enforcement requires robust
cooperation, both domestically and internationally, between law
enforcement and regulatory agencies as well as thoughtful
partnerships with industry.
Consequently, the Secret Service remains squarely focused
on hiring, developing, and retaining a skilled and experienced
investigative workforce. We are committed to working with
partners across the law enforcement community to jointly train
and develop shared technical solutions. The constant
development of investigative capabilities is how we maintain
our ability to effectively respond to innovations of technology
now and into the future. Lastly, continued attention is needed
to ensure that law enforcement agencies maintain lawful access
to critical sources of evidence regardless of where or in what
form that information is stored.
In closing, let me speak directly to those who seek to
further the illicit activities through the use of digital
currencies. As the investigative work of the United States
Secret Service and our law enforcement partners continues to
demonstrate, we are relentless in enforcing the law, and we
will not be stopped by the perceived anonymity of digital
currencies or the broader Internet.
Thank you again for your opportunity to testify and I look
forward to your questions.
[The prepared statement of Mr. Novy can be found on page 41
of the Appendix.]
Chairman Pearce. Thank you.
Mr. Ott, we have introduced you previously and I recognize
that your just in time manufacturing has walked in just in
time. If you are settled, we will recognize you for 5 minutes.
STATEMENT OF THOMAS OTT
Mr. Ott. Chairman Pearce, Ranking Member Perlmutter, and
Members of the subcommittee, thank you for inviting me to speak
today on behalf of the Financial Crimes Enforcement Network
commonly known as FinCEN.
FinCEN has a leading role in the regulation of virtual
currency activity and supports law enforcement investigations
involving virtual currency and related financial crimes. So, I
appreciate the opportunity to discuss our work in this space
and the national security implications and illicit finance
risks presented by virtual currency. FinCEN also works to
combat the threats presented by both traditional and emerging
payment systems while promoting responsible technological
innovation throughout the financial sector.
In 2011, FinCEN issued a regulation that defined money
transmissions services as the acceptance and transmission of
currency, funds, and other value that substitutes for currency
by any means. The 2011 rule serves as the foundation of our
regulation of certain virtual currency activity. In March 2013,
FinCEN issued guidance to clarify that virtual currency
exchangers and administrators generally qualify as money
transmitters under the Bank Secrecy Act.
Virtual currency payments pose illicit financing risk and
necessitate careful assessment and mitigation. In particular,
we are concerned about the growing use of decentralized
convertible virtual currency to facilitate cybercrime, fraud,
extortion, drug trafficking, money laundering, and other
transnational crimes. FinCEN estimates that at least 4 billion
in virtual currency has moved through the dark Net marketplaces
since 2011. While traditional financial methods remain the
primary vehicle for illicit activity, FinCEN believes virtual
currency presents specific illicit finance risks and that
without vigilance and targeted action, the scale of this
activity could grow.
FinCEN has increasingly prioritized identifying, tracing,
and disrupting the flow of illicit virtual currency activity.
To that end, FinCEN examines financial institutions for
compliance with their regulatory obligations to prevent money
laundering and terrorist financing. In 2014, FinCEN together
with its delegated examiners at the IRS have conducted
examinations at more than one-third of all registered virtual
currency money transmitters in the United States.
FinCEN has also taken significant enforcement actions. In
July 2017, acting in coordination with our law enforcement
partners, FinCEN assessed a penalty of over $110 million
against BTC-e, an Internet-based foreign located money
transmitter for various BSA violations. As part of this action,
FinCEN also assessed a $12 million penalty against one of BTC-
e's operators, the highest penalty we have ever assessed
against an individual.
Collaboration is critical to combat the growing threats
presented by virtual currency. Just last month, I met with my
enforcement counterparts at the CFTC (Commodity Futures Trading
Commission) and the SEC. My staff and others at FinCEN
carefully and closely coordinate with these agencies on an
ongoing basis.
One area where we continue to work together is on the
illicit finance risk surrounding the recent growth of the
initial coin offerings or ICOs. While ICO arrangements vary
and, depending on their structure, may be subject to different
authorities, one fact remains clear: FinCEN along with our
partners at the SEC and CFTC expect businesses involved in ICOs
to meet all of their AML (anti-money laundering) CFT (combating
the financing of terrorism) obligations.
As both a former police officer and a former Federal
prosecutor, I also want to highlight the important
collaborations FinCEN has with our partners in law enforcement.
FinCEN has provided support in over 100 cases since 2016.
FinCEN's experts trace different types of virtual currency
activities, identify suspicious sources of funds, target
unregistered MSBs that do business in whole or in substantial
part within the United States, and help disrupt transnational
criminal networks operating in virtual currency.
Foremost, among our challenges in combating this activity,
is the lack of consistent AML CFT regulations and supervision
of virtual currency activity in most jurisdictions around the
world. FinCEN and other Treasury components are working with
the Financial Action Task Force or FATF and the Egmont Group to
engage key jurisdictions directly to address these
vulnerabilities. FinCEN looks forward to working with the
committee, the law enforcement partners, the public sector, and
our regulatory partners to identify strategies to help the
United States remain both a global hub for innovation and a
safe and secure financial system.
Thank you again for having me here today. I am happy to
answer any of the questions you may have.
[The prepared statement of Mr. Ott can be found on page 48
of the Appendix.]
Chairman Pearce. Thank you, Mr. Ott.
I now recognize myself for 5 minutes for questions. Mr.
Novy, you quote on page four of your document about the
different cryptocurrencies, the different exchanges that exist,
how do you--many times these are very dark--how do you go about
establishing those? How easy is it to find out about them?
Mr. Novy. Thank you, Mr. Chairman. So, in the Secret
Service when we conduct our investigations, we target any and
all technologies or currencies that can be used for illicit
activity. And so, therefore, digital currencies or virtual
currencies are one of those types of technologies or means of
transacting. So, what we do is in our undercover operations or
through our operations in our criminal investigations, we
investigate and look for different currencies, different
transactions, different ways that crimes are committed and then
we look to see how they are doing it.
We also do that through criminal informants. Criminal
informants introduce us to those different areas as well. And
so, that is how we learn these things.
Chairman Pearce. I guess my question is, do you know what
you don't know? Do you know how many currencies are out there
that have not yet surfaced? Do you have a good feeling for that
and how do you go about identifying them?
Mr. Novy. That is a very good question, Mr. Chairman. The
answer is we have an understanding that there are a lot of
digital currencies out there. We don't know every single one of
them. We understand a majority of the major ones, but
currencies and coins can be created through technology. So, we
don't know every single one of them. But through our partners
of our Electronic Crimes Task Forces, which are both members of
academia, of the private sector as well as other law
enforcement, we collaborate together to learn and teach each
other what each of us learns and that is how we keep up with
it.
But the answer is I couldn't tell you how many digital
currencies or virtual currencies are out there, but as they
come up and they are used by--
Chairman Pearce. Yes, sure. You also quote fairly
significant numbers of transactions and are you pretty
comfortable that those are accurate?
Mr. Ott, let me ask you that because I think, don't you
have an intersection of responsibility right here at this
point, aren't you both looking at the same issues?
Mr. Ott. Yes, Chairman. We have, through our intelligence
division, we regularly track the incoming BSA filings, analyze
those based on our business rules and be able to analyze that,
put together a piece that would disseminate that to--
Chairman Pearce. Are you pretty comfortable that you know
what is going on?
Mr. Ott. The financial institutions are a very great
partner and the best resource for that type of information.
Yes, sir.
Chairman Pearce. I guess one of my deeper concerns is--
well, let me switch over to a different question. Not all the
transactions are illicit with the digital currency. Is that
correct?
Mr. Ott. That is correct.
Chairman Pearce. And so, if digital currencies are used for
legitimate transactions, how does say the IRS identify tax
liabilities for legitimate operations if you have a digital
currency?
Mr. Ott. Well, again, that would be--I am not familiar with
the IRS procedures as it responds to virtual currency. FinCEN
focuses on money transmissions. I know that we certainly work
very closely with all law enforcement agencies as well as--
Chairman Pearce. OK. If I could interrupt, I am running out
of time here. I want to drill down on this a bit. If any of you
have an idea because this to me is one of the biggest exposures
that we have is legitimate goods and services being bought by
very difficult-to-track transaction methods, and, at some
point, you undermine the entire stability of society because
society does work with its safety nets, with government
spending off of taxation.
And if that becomes more difficult to pursue, if it is more
difficult to identify what those transactions are, then, I am
just wondering is anybody thinking about this aspect, maybe
right now the digital currencies are not that prevalent, but in
a matter of time, they will be unless we understand what we are
dealing with. So, if somebody wants to wrap up in a 30-second
answer here.
Mr. Nevano. Chairman, I will take that question. It is my
understanding that the IRS treats virtual currency as property
and therefore, the sale of virtual currency actually is subject
to capital gains tax.
Chairman Pearce. OK. But that is assuming they can see it.
And all of you are talking in your testimony about many of them
are invisible. And so, how are they going to identify it as a
property if it is not too visible. That is my question and I
will leave it dangling in the air here.
We go to Mr. Foster now for 5 minutes.
Mr. Foster. Thank you, Mr. Chairman.
Deputy Assistant Director Nevano, are you aware of any
higher-ranking ICE officials who will be testifying before
Congress who might address the crisis being caused by this
Administration's polices of children being deliberately
separated from their parents?
Mr. Nevano. Congressman, at this time, I am not aware of
any--
Mr. Foster. So, you are all we have. OK.
Now, first on the issue of family separation, I understand
the Administration has announced plans to expand its capacity
for holding children who have been separated from their parents
in facilities sometimes known as ``baby jails''. And I was
wondering if you can give this committee any further
information about what this expanded capacity will look like.
Specifically, will ICE be constructing more cages to separate
children from their parents? Will this expanded capacity be in
the same location as the children's parents where they are
being held or elsewhere?
And what sort of childcare training are the personnel
running these facilities being given? And are the background
checks for these personnel up to the standards that we expect
for childcare in the United States?
Mr. Nevano. Chairman, thank you for your--Congressman,
thank you for your question. I am here to testify today
regarding virtual currency. I work for the director within the
Department of Homeland Security. That is Homeland Security
Investigations and our mission is basically to combat
transnational criminal organizations that seek to basically
exploit our immigration customs laws.
I do not work for the director within the Department of
Homeland Security that handles the matters that you have
addressed. I would be happy to take your questions back and
have someone appropriately answer those questions, but that
would not be me sitting in my position with Homeland Security
Investigations.
Mr. Foster. Yes. So, I will be submitting those for the
record and look forward to your responses on them because this
is just a crucial issue.
Now, more locally in my district, ICE in the last month or
so has executed a number of raids. ICE conducted a 6-day
enforcement action in and around my district. I was told from
advocates on the ground, which were later confirmed by the
Chicago Tribune and others, that ICE agents pulled over and
detained one Victor Cortez, a Mexican national who is here
legally, visiting a friend in Joliet, Illinois in my district.
Mr. Cortez was in the country legally with a valid visa and Mr.
Cortez produced this visa for ICE agents and yet despite this,
he was still detained for several hours.
And so, my first question is, is it a common practice for
ICE to pull over and detain anyone simply because they look
Hispanic or speak with an accent?
Mr. Nevano. Again, Congressman, I appreciate your concerns
and your questions. I am not familiar with the situation that
you are describing. Again, I work for the Homeland Security
Investigations Directorate and that does not sound like
something that HSI would have been involved in. I am happy to
take the questions back for the record and provide you the
answers that you require, sir.
Mr. Foster. OK. So, this issue of pulling people over where
they actually--there is an illegal--they are here legally and
are being pulled over, it is a little bit personal to me. My
wife is an immigrant from Korea, but here obviously legally.
Can she expect also to be pulled over because someone thinks
that she doesn't look like an American?
Mr. Nevano. Again, Congressman, I am not familiar with the
situation. I will tell you that all HSI agents go through
specific training, are trained not to profile and to conduct
targeted law enforcement investigations. Again, specific
circumstances you are talking about, I am not prepared to
testify here today with those circumstances, but I would be
happy to take those questions back and provide you a response.
Mr. Foster. Yes. I would be interested specifically on the
profiling of Mr. Cortez. Is it a common practice for ICE to
impersonate police officers and conduct traffic stops or is
that part of your training as standard operating procedure?
Mr. Nevano. Well, ICE deportation officers as well as
special agents are considered, in our view, police officers. We
are law enforcement officers, but to deal with the specific
questions that you are talking about, I don't know the
specifics. So, it is hard for me to provide you an answer
without knowing those specifics. Again, I am happy to take
those questions back and respond appropriately once those
questions are submitted for the record.
Mr. Foster. Thank you. And I also think all of Congress
looks forward to your superiors having the courage to appear
before Congress to answer for the outrage that is happening in
our southern border. Thank you.
Chairman Pearce. The gentleman yields back.
And the Chair would now recognize the gentleman from North
Carolina, Mr. Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
Again, thank each of you for your statements today and your
insights on these critical issues. I would ask you in these
illicit cases that you have identified, are the perpetrators
that you have previously flagged, are they suspicious? Are they
regarded as being engaged in other activities outside of
cryptocurrency, or is this a traditional group of people, the
same plot of actors or is this a new breed?
Mr. Novy. Congressman, I could take that. So, a majority of
the cyber criminals that we go after, a majority of them are
using some type of virtual currency to move their money, to
launder their money, to either make sales or purchases of
illicit items or to further their crimes. We are actually going
after the criminals. And then, as we are going after the
criminals, we come across the ways that they are moving money
and the ways that they are laundering money.
And so, as Secret Service agents, we are financial crimes
investigators as we have been since 1865, and so, like I said
in my testimony, we follow the money.
Mr. Pittenger. So, these are traditional criminals that
have been involved in previous criminality.
Mr. Novy. They could be. They could be. But the thing is,
sir, they are pretty sophisticated these days. These days, the
cyber criminals of today are a little bit different than the
bank robbers of yesterday, but they are still doing the same
thing, trying to steal the money.
Mr. Pittenger. Yes, sir. There is also evidence suggesting
that cryptocurrencies are increasingly used in money laundering
schemes by organized criminal groups. But does U.S. law
enforcement see any trends in the use of cryptocurrencies for
money laundering related to drug traffickers, human
traffickers, or the trade-based money laundering?
Mr. Nevano. As my colleague from the Secret Service stated,
we investigate all crimes, all crimes in the dark Net. So, yes,
we would be concerned with drug traffickers, human traffickers,
all individuals who are involved in nefarious activity. I think
the goal of using these cryptocurrencies is the anonymity that
they believe it provides.
So, we in law enforcement obviously face challenges at
times to determine who they are. Some of these individuals
still use traditional means such as third-party money
laundering, trade-based money laundering. But those who want to
be pseudo-anonymous actually use these decentralized
cryptocurrencies to conduct their businesses on the dark Net.
Mr. Pittenger. Do we have any estimates in terms of
percentage, the amount of these crimes that are conducted cyber
or otherwise with just the illicit use of cryptocurrencies? How
much of a factor is it?
Mr. Novy. Congressman, I can't come up with an exact
percentage right now, but I can tell you that a good majority
of the crimes that the Secret Service investigates, virtual
currencies are used in those transactions, primarily because
when they are transacting online in the dark Web or using
criminal forums, that is how they can easily move money without
having to talk to each other or communicate but also use
anonymity.
Mr. Pittenger. Do you have the legal latitude to perform
your duties? Are there any legislative interests that you have
that will give you greater capability to be successful in your
duties in stopping illicit finance?
Mr. Novy. For the Secret Service, I think I am not
comfortable with the Secret Service suggesting that, but I will
tell you that as technology increases, we use the laws and
authorities that we have today. But, with that being said, we
always have to look to see what is going to be the next crime,
what is going to be the next step.
And so, we would say that we are always looking to make
sure that laws and statutes are always kept up-to-date so that
we can maintain and keep active what we can get.
Mr. Pittenger. Is there anything that you see now, are
there any impediments now legally that impede your ability to
perform?
Mr. Novy. I would say currently--currently, I would say the
CLOUD Act was a very good step in moving forward for us to be
able to get access to evidence, digital evidence in such an
area. I would say as we use that and as we move forward, I
would look to make sure that we still maintain access to lawful
access to digital evidence that we can get from--when we serve
subpoenas and court orders.
Mr. Pittenger. Yes, sir. Anybody else want to comment on
that point?
Well, my last question would be related to just--do you
believe that there are additional factors that would limit
terrorist exploitation of virtual currencies and how could they
impact the domestic or international counterterrorism community
focus on this front?
Mr. Nevano. I think as we stated, all transnational
criminal organizations, people involved in nefarious
activities, there is obviously a desire to be anonymous and the
use of cryptocurrencies would be one. So, I think it is
definitely a possibility that we all need to be concerned
about.
Mr. Pittenger. Yes, sir. Thank you. My time is expired.
Chairman Pearce. The gentleman's time is expired.
The Chair would now recognize the Ranking Member of the
full committee, Ms. Waters, for 5 minutes.
Ms. Waters. Thank you very much.
Mr. Nevano, I know that you are here to testify about the
illicit use of virtual currency, but that is only one aspect of
your job. As I see it, you are responsible--you are the Deputy
Assistant Director responsible for the Illicit Trade, Travel,
and Finance Division of Homeland Security Investigations and
U.S. Immigration and Customs Enforcement. Is that right?
Mr. Nevano. That is correct.
Ms. Waters. OK. Can you tell me what you do with that
aspect of your job that is described as U.S. Immigration and
Customs Enforcement?
Mr. Nevano. So, I work for the Department of Homeland
Security which Immigration and Customs Enforcement is a
directorate under the Department of Homeland Security. Within
Immigration and Customs Enforcement, there are several
components: Homeland Security Investigations being one,
Enforcement Removal Operations being another. I do not work for
Enforcement Removal Operations. I work for the criminal
investigations side, which is Homeland Security Investigations.
Ms. Waters. Are you familiar with the zero tolerance policy
of the agency?
Mr. Nevano. Yes. I have heard of it. I know it is all over
the news.
Ms. Waters. Well, I need you to help me understand a few
things. If a mother and child or children go to what is known
as a port of entry to claim amnesty, do you have anything to do
with that at all or your department, under Immigration and
Customs Enforcement, have anything to do with that aspect of
the agency?
Mr. Nevano. So, if an individual shows up at a port of
entry and claims asylum, they would be dealt with by our
Customs and Border Patrol, which is basically under the
Department of Homeland Security. How my directorate would be
involved in individuals who are claiming asylum is more from
the fraud standpoint. If there were facilitators who are
actually organizing frivolous claims of asylum here in the
United States, it would be my directorate that would actually
look into those frivolous claims, but we are not the frontline
who are dealing with these individuals when they come--
Ms. Waters. So, explain to me how it works. So, a mother
and children show up at the port of entry claiming amnesty and
as I understand zero tolerance policy, they are not facilitated
in the way that we thought the law works. They could be subject
to detention at that point. What happens to the child at that
point?
Mr. Nevano. Again, Congressman, I am not familiar with the
current practices along the border because I do not work for
that directorate. So, I cannot comment, but I would be happy to
take those questions back for the record.
Ms. Waters. You are the Deputy Assistant Director and U.S.
Immigration and Customs Enforcement is part of your
responsibility or oversight. Do you supervise anybody in that
division?
Mr. Nevano. So, again, I do work for Immigration and
Customs Enforcement, but specifically for Homeland Security
Investigations and we do not have people on the frontline who
are making those determinations of admissibility when an
individual enters the United States.
Ms. Waters. What and how do you investigate someone who is
claiming amnesty who is thought not to be eligible for amnesty?
What happens to them at that point?
Mr. Nevano. We don't investigate every single person who
claims--
Ms. Waters. But the ones that you do investigate, what
happens? How do you do that?
Mr. Nevano. We are looking more to the facilitators, the
organizations who are exploiting these individuals who are
claiming asylum, taking their money, filing frivolous claims.
That is more what Homeland Security Investigations does. We are
not looking at every single person who files an application.
Ms. Waters. I know that you may not be looking at every
single individual, but those that you do look at, maybe it is a
mother with children who you think may be part of a ring where
they are trying to get folks into the United States at the port
of entry, you have to investigate them. You don't investigate
all of them, but when you do, how does it work?
What do you do from that point? And if you want to continue
the investigation because you are suspicious, you have enough
information that would lead you to believe that something is
going on, what happens to the child? Who has the responsibility
for taking the child if you are going to retain the woman or
the family? What happens at that point?
Mr. Nevano. Again, Congressman, I do not deal with the
detention of individuals. Those decisions are made by another
directorate. We are on the backend. We are investigating when
people have already made an entry into the United States. They
may have a hearing before an immigration judge here in the
United States. We are not involved in that.
Ms. Waters. So, you are not involved in the supervision of
that aspect of your job at all. Is that right?
Mr. Nevano. That is correct.
Ms. Waters. Thank you very much. I yield back the balance
of my time.
Chairman Pearce. The gentlelady yields back.
The Chair now recognizes the main man from Maine, Mr.
Poliquin, for 5 minutes.
Mr. Poliquin. Thank you very much, Mr. Chairman. Thank you,
gentlemen, for being here very much. I appreciate it.
You folks deal with criminal activity at the Federal level
or from a Federal standpoint and you have a lot of tools
available to you that we don't have up in Bangor, Maine or
Lewiston, Maine, both of which I represent. I represent the
rural part of Maine and Bangor and Lewiston are part of my
district.
Tell me a little bit about the type of training that you
folks might extend to law enforcement officials on the ground
at the local level in our great State and other parts of our
country. Mr. Nevano, who wants to take a shot at that?
Mr. Novy. I will take that one.
Mr. Poliquin. Yes.
Mr. Novy. So, the Secret Service, we actually have
partnered with the State of Alabama and we have the National
Computer Forensics Institute in Alabama.
Mr. Poliquin. Right.
Mr. Novy. Fantastic operation, fantastic organization and
what we do there is we train solely State and local law
enforcement, prosecutors, and judges. The Secret Service, we
focus on the law enforcement portion of it while the State of
Alabama District Attorney Association focuses on the
prosecutors and judges.
And what we do is we take the same level of training that
we give our Secret Service agents and we provide that to State
and locals especially for someone like your folks in Maine,
upstate, downstate, wherever you are going to go. The idea is
we are looking to train the cyber supply chain if you want to
call it, all the way from law enforcement all the way up to
judges so that they completely understand and we don't leave
them alone.
The main thing is after they get their training, they
actually leave with the equipment that they are trained on
because many times, they can't afford a digital forensic lab of
their own. So, when they leave there, whatever equipment they
are trained on, they actually get that equipment. They take it
back to their police department and use that at their police
department to work on any investigation. It doesn't have to be
a cyber crime. It could be a rape. It could be a murder. It
could be a bank robbery. It could be any type of crime.
The main thing, though, is when it deals with cyber, cyber
is really difficult technology and sometimes it takes a little
bit more. And so, we don't leave people hanging out there as
well. What we do is we connect them to our electronic crimes
task forces. By doing that, let us say an officer in Maine has
a hard time trying to figure out a forensic tool or something
along those lines, we will work with them through our
Electronic Crimes Task Force primarily in Boston, but we will
actually send agents up to Maine if we need to, to help them
understand. We will work whatever they need to work on.
Mr. Poliquin. My primary constitutional responsibility, Mr.
Novy, is to protect our families and there is no one who is
more pro jobs, pro business, pro national security, pro
protecting our families than I am. So, I really appreciate you
giving me that information because it is all hands on deck. We
have to make sure that the folks at the local level who are the
frontline, that thin blue line, have the tools they need to do
all of this work. And this whole cryptocurrency and everything
else is new to a lot of folks and very complicated.
Let me morph a little bit and maybe, Mr. Nevano, this would
be for you, but if not, someone else jump in, ransomware where
bad actors are able to put a virus or something else on your
system whether it be personally or at a business and
effectively contact you and say, ``Unless you pay us X amount
of money, we will let this virus run rampant and destroy your
system and interrupt your workflow'' and which could kill jobs
and so forth and so on.
What about the use of cryptocurrency to pay that
ransomware--excuse me, that ransom, if you will, to remove that
problem from your network? Do you folks run into that and how
in the heck do you fight that? How do our folks at the local
level fight that?
Mr. Novy. I will take that one as well, Congressman.
Mr. Poliquin. Thank you.
Mr. Novy. So, ransomware, actually we believe at the Secret
Service, has proliferated from the use of digital currencies
because it is used in just about every payment that you can
imagine for ransomware, and because of the anonymity and the
quickness that you could make a transaction, that is why people
use virtual currencies for ransomware.
The tough thing about ransomware is it does take
preparation. People should take into consideration basic
cybersecurity and basic cyber practices. People should have
backups to their systems. In the Secret Service, we have
actually gone out and done a whole bunch of workshops all
around the Nation with us as well as with the Financial
Services Information Sharing Analysis Center as well as the FBI
where we have gone and we have taught different courses and
classes of how to defeat or how to get prepared for ransomware.
But to answer your question, virtual currency has actually
been the propagator for ransomware we believe.
Mr. Poliquin. If I call Bill O'Malley who is the Chief of
Police in Bangor or Phil Kroll who is the Chief of Police in
Auburn, Maine, would they know who to call at your shop to get
help for any of these issues? Are you folks pretty good as far
as outreach to our local folks in the ground?
Mr. Novy. Yes, absolutely. So, we have an office in
Portland, Maine and that office in Portland, Maine is actually
there to go and liaison with all law enforcement agencies no
matter how big or small they are in your State.
Mr. Poliquin. OK.
Yes, sir.
Mr. Nevano. I am familiar with your AOR being from New
England and I know that we have multiple task forces. We have
an office in Portland, Maine; Bangor, Maine; as well as
Houlton, Maine. And I know that we have several task forces in
those areas where we work every day and collaborate with State
and local law enforcement officers in your district.
Mr. Poliquin. Great. Well, thank you very much, and I do
want to--
Chairman Pearce. The gentleman's time is expired.
Mr. Poliquin. How do you divide your loyalties between the
Red Sox and the Nationals if you are from New England? It is
not easy.
Thank you, Mr. Chairman. I yield back my time. The witness
does not have to answer that question.
Chairman Pearce. It was not the lapse of time. It was your
problem with the last statement. Thank you.
But now, I recognize the gentlelady from New York, Mrs.
Maloney, for 5 minutes.
Mrs. Maloney. Thank you. I thank the Chairman for yielding.
Mr. Nevano, first of all, I would like to thank all of the
panelists for being here. But, Mr. Nevano, I am sure you are
aware of what is happening at our southern border. Children
including babies are being ripped out of their parents' arms
and these people were just merely looking for a better life for
their families here in the United States. It is nothing short
of government-sanctioned child abuse and runs counter to
everything that we stand for as a Nation.
I have seen photos of children in cages, heard recordings
of children crying, and spoken with fathers at a detention
center this past weekend in New Jersey where they came legally
seeking asylum and were put into detention prisons. And one
father said, at three o'clock in the morning, they came and
tore his daughter from his arms. And just last night, the
Associated Press reported that babies and toddlers are being
shipped literally hundreds of miles away from their parents to
be housed in so-called tender age facilities.
Make no mistake. I don't care what they are called. These
are prisons--prisons for babies. And has this Administration no
soul? Have they no basic human empathy? This is not governance.
This is not enforcing existing law. This is law that was made
up by this Administration. And it is stone cold evil and is
entirely the choice of this Administration and a reflection of
a heartless ideology.
So, my question, Mr. Nevano, is that surely many ICE agents
are mothers and fathers in addition to their role with the
agency. Is there any concern among your colleagues about the
irreparable damage this policy of separation will have on these
children?
Mr. Nevano. Congressman, thank you for your question.
Again, working for Homeland Security Investigations, we are not
involved in that aspect of what you are speaking about. I am a
parent and of course I understand exactly what you are saying.
I have been doing this job for 27 years. I am a law enforcement
officer and I certainly understand what you are saying.
But I am not here to comment on that because I am here to
testify on virtual currency. I would be happy to take any
specific questions you have back for the record.
Mrs. Maloney. Well, this Administration has deliberately
chosen this path and would you agree that the Administration
has the authority to change this policy? But now I know you are
not going to answer, but I do believe they could change it.
But before I close, I would like to play a very troubling
recording that has been widely circulated in the news this
week.
[Audio recording played.]
Mrs. Maloney. Well, I just want to close by saying as a
mother of two children, I find this policy absolutely
unconscionable. I cannot imagine what it is like to have your
children torn from your arms and these are people that are just
seeking a better life for their families. They are coming here
seeking asylum. We have always been a beacon of hope to the
world, and persecuting and separating children from their
families is just un-American and just plain wrong.
And it is an outrageous policy. It needs to end and we need
to make sure the Administration absolutely never does it again.
I thank you very much and I yield back.
Chairman Pearce. The gentlelady yields back.
The Chair would now recognize the gentleman from Ohio, Mr.
Davidson, for 5 minutes.
Mr. Davidson. Thank you, Mr. Chairman, and thank you to our
witnesses, I appreciate your expertise on financial crimes
enforcement, illicit finance, and particularly related to
cryptocurrencies today. Hopefully, we can stay on topic during
my 5 minutes, I will try to stay focused on the topic at hand.
Because it is hard to get these hearings scheduled, so thank
you, we can't change course on hearings all the time because of
the news of the day, pressing as it is, I trust that we are on
a path to a better policy in all sorts of arenas, including
this one which we are here to work on.
So, the past several years I have been watching the growth
of digital assets and cryptocurrencies and I am excited about
the opportunities they create. And I am curious just in terms
of framing this issue, it is very important that your tools in
your kit bag stay in compliance with current laws. And we have
illicit finance denominated in U.S. dollars, correct? Correct?
Mr. Novy. So, Congressman, it could be denominated in a
number of things, the cost or the value of digital currency--
Mr. Davidson. No, no. I am not talking about
cryptocurrencies, I am just--the cash, cash in bags, duffel
bags of cash, hay bales full of cash, ship containers full of
cash, rail cars full of cash, suitcases full of cash, we
transact in cash, right?
There is also illicit finance in hawala networks, right?
These things aren't illegal, we are looking for ways to be able
to--U.S. dollars aren't illegal, carrying cash in a satchel is
not illegal. Though we have set trip wires in place like
crossing a border with too much cash without reporting that
they are crossing a border with too much cash. These are the
things that help you catch that.
Still struggling last I heard about hawala networks and
things like that. Though operating a hawala network isn't
illegal, operating one to do illicit things is. And I guess,
how do we apply those sort of kit bag things to
cryptocurrencies so that we protect the use of
cryptocurrencies, yet have the trip wires that help us detect
illegal activity with the cryptocurrencies?
Mr. Nevano. So, when we conduct our investigations, as you
are mentioning all tools in our tool bag are used, whether it
is traditional schemes to attack money laundering, which would
be as you are mentioning: Bulk cash smuggling, third-party
money laundering, trade-based money laundering, we also--as my
colleague from Secret Service mentioned, use of confidential
informants, use of undercover operations, whatever we can do to
basically detect, disrupt, and dismantle those organizations,
whether they are using the traditional methods that you are
speaking about, or cryptocurrencies, we are trained to actually
attack the problem as it exists.
Mr. Davidson. In general, when something moves across an
electronic format, is it easier to have record keeping on that
than say hawala or cash? Even cryptocurrencies? There is a
record, right? A searchable record or queriable record?
Mr. Novy. So, Congressman, the answer is usually yes.
Usually when it creates a record there is an electronic record
that can be followed. However, in virtual currencies sometimes
it can be obscured through tumblers or mixers, or something
along those lines as well. So, there is a record if you can
find it, but sometimes it is a little bit harder to find.
Mr. Davidson. OK. And so, additional guidance has been
given to provide compliance as money service businesses for
people that are doing these transactions in the U.S. We have
places that don't comply with those laws just like we have it
for people who don't comply with it for wires and other ways
that we do it with cash.
I am concerned about, in the States, we have all sorts of
regs that are duplicative. Wyoming has some laws related to
crypto, but so does New York. I am not sure why New York needs
such a heavy-handed AML provision, do you view the duplication
as counterproductive, would it be easier to have a uniform reg
across the country or is it easier to have State-based systems
as well?
Mr. Ott. Well, Congressman, for FinCEN's perspective, of
course we are on the Federal level, but many we recognize that
we work very closely with some of our State regulators as well,
they adopt many of the similar provisions as are found in the
Bank Secrecy Act, and what we find in terms of the biggest
challenge that we have in regulating virtual currency is in
fact, an inconsistent or lack of consistent AML CFT regulations
internationally that open up vulnerabilities within the United
States. And I believe, while we are working with our foreign
counterparts to try to correct that situation, feel that there
will still be a vulnerability until we have that international
cooperation.
Mr. Davidson. Thank you, my time has expired.
Chairman Pearce. The gentleman's time is expired, the Chair
will now recognize Mr. Vargas for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman, I appreciate
the opportunity. Again, I want to thank the three witnesses
here today, as I especially want to thank them for your
diligent work against illicit use of cryptocurrency, especially
in sex trafficking and drug trafficking. Again, thank you very
much. I do, however, want to ask some questions to Mr. Nevano,
I am taking a look here at the information that you sent to us
and it does say, U.S. Immigration and Customs Enforcement right
at the top.
And I think when you were introduced, we heard that you had
more experience than your present job. Could you repeat again,
your career has been long, it has been 27 years in law
enforcement and we appreciate that, what other experiences,
what other jobs did you have with ICE?
Mr. Nevano. Congressman, I started my career as an
immigration inspector. That is where I started my career. I
became a special agent. I worked my way up to be a group
supervisor. Assistant special agent in charge. As you are
probably aware, in 2003, Immigration Naturalization Service and
Customs actually merged to form Immigration and Customs
Enforcement, Homeland Security Investigations. Since my time in
headquarters, I have worked as a unit chief in asset
forfeiture, I was the chief of staff for the deputy director of
Immigration and Customs Enforcement. And I was also now in my
position, I am the Deputy Assistant Director for Illicit Trade,
Travel, and Finance.
Mr. Vargas. So, you do have quite a bit of experience
beyond simply working in the position that you have today, I
think some of the questions that we were asking of you were
questions maybe that you do have some experience on. I do want
to ask some myself, are you familiar with the family--the
Family Case Management program?
Mr. Nevano. I have heard of it, sir. I know it is part of
the enforcement removal operations portfolio; I am not
intimately, though, knowledgeable about it.
Mr. Vargas. OK. It had an almost 100 percent court
appearance rate, so this is where the families were not
separated instead they were able to stay together, and then
they had to come back for court appearances, it almost had a
100 percent rate of people coming back for their court
appearance, it was very, very successful.
It didn't--they did this for families that weren't flight
risks and they weren't dangerous, it was quite successful, I
don't know why we stopped it. But that is one of the reasons
why there has to be the separation of families the President
says, there does not have to be, when, in fact, the President
claims the DHS is required to separate families under current
law, I don't understand, maybe you could explain that to me.
Contrary to claims by the Attorney General, the Bible in
Romans 13, which I know well, I studied to be a priest for a
number of years, it is not statutory authority. It doesn't
justify this horrific and unconscionable policy. But can you
point to any statutory authority mandating that families be
separated because, I can point you to these--the Family Case
Manager program that didn't do this, didn't separate the
families?
Mr. Nevano. I am not familiar with any statutes that
require that, Congressman.
Mr. Vargas. I can tell you this and I think you would agree
with this, I represent the border in California, and I do go
and visit not only with ICE but the CBP and BP, Border Patrol,
I can tell you this what they are doing today, your agents,
they are bringing diapers that they are paying for themselves,
milk for kids, other things that these children need, because
they know they are going to be separated, and they think
because like you, they are parents, they think they need these
things.
If you ask your own agents out there, you will tell--they
will tell you, they do not like what they are doing, they are
not happy about it, they are spending their own money trying to
help these kids, are you familiar with any of that?
Mr. Nevano. Congressman, again, I think you are speaking
about Border Patrol agents--
Mr. Vargas. No, no. I am also speaking about the CBP, and I
am also speaking about ICE.
Mr. Nevano. CBP is not under my directorate, so again, our
special agents more than likely, unless they are investigating
some type of transnational criminal organization entering the
border, would not be involved in some of the circumstances you
are speaking about.
Mr. Vargas. But I think you are being very technical,
because you do have experience within all of the range there,
if you--as you would under--as you described to me earlier, you
were in fact the line officer, you did in fact have--
So, what I would tell you is this, this policy that you
have now, I wish you would go back and look at those and talk
to your agents on the look--on the ground, they don't like it,
they know it is not their values. When you go and you see like
I had the opportunity to see on Monday these children, they
just want their moms, they just want their dads. What we are
doing is wrong. Certainly not based on Christianity or any type
of religion that I am aware of, and it has to be reversed.
Your own agents, if you talk to them, they will tell you,
and you can go there and see the diapers that they buy, the
food that they buy for these children, because they are
concerned about their own safety, the safety and the wellbeing
of these kids when they are separated from their moms, they are
parents too. If you would like to answer the questions.
Mr. Nevano. Congressman, in my 27 years career, I have
worked under several different Administrations, and during
those Administrations with the change, laws continually change,
the way we are enforcing laws. And, again, what you are
speaking about now in the current environment I am not involved
with what you are speaking about. We are involved in the
aftermath, if there are individuals who are being so exploited,
who are victims who are being supported by organizations, that
is where we will come in to try to look at the facilitate--the
people who are facilitating this activity.
Mr. Vargas. Thank you, I yield back. Thank you.
Chairman Pearce. The gentleman's time has expired. The
Chair would now recognize Mr. Budd for 5 minutes.
Mr. Budd. Thank you, Mr. Chairman. And again, thanks to the
witnesses for your time today, for your expertise, all you do
for security for our country. And I want to shift a bit to the
topic, the original topic at hand, terror financing and virtual
currencies. So, the Foundation for Defense of Democracies or
FDD, they have been a great resource to me and staff on issues
like this. And they recently reported the first publicly
verifiable instance of an online propaganda unit, it was based
in Gaza, in the Gaza Strip, calling for Muslims worldwide to
donate funds for terrorist purposes. They only raised a few
hundred dollars, but even this is an early sign, I am thinking,
and it is disturbing that terrorist financing mechanisms are
evolving using this technology.
I have also seen evidence of Hamas groups embracing the
technology and promoting Wallet apps like Telegram. So the
question is, what is the likelihood that we see more propaganda
or terrorist campaigns from groups like this in the future? And
what can be done to prevent it from happening?
Mr. Nevano. I am familiar with the article that you
mentioned and I would agree with you that I believe there were
only two individuals that actually volunteered to donate, it
was somewhere in the vicinity of $500 that was--that was
received, so although it was a low turnout as far as
volunteers, it did something that law enforcement would be
concerned about, because as virtual currency continues to grow,
it is certainly an avenue that could be used for those types of
propaganda situations to collect money in support of terrorist
organizations.
Mr. Budd. So even at a few hundred dollars, we still
shouldn't dismiss something like this?
Mr. Nevano. Absolutely not.
Mr. Budd. OK. Thank you. Can you tell me what factors are
limiting terrorist exploitation of the virtual currencies,
basically what is working, and how that should impact the
counterterrorism community, and Congress' focus on this front?
Mr. Nevano. So one of the challenges I think is terrorist
organizations are used to the traditional money laundering/bulk
cash smuggling, hawala situations. I think one of the
challenges that we may be facing for the traditional terrorist
organizations that we are speaking about, is maybe some of the
resources logistics, some of the locations that they are
involved, and that they don't have the technology right now,
but, over time with, as technology advances, et cetera, that
certainly would be a concern.
In lone wolf terrorist type of situations where you may
have a domestic terrorism situation, that, to me, would be a
concern, because they would have the technology, they would
have the access to the internet, et cetera, working right at
home from their computers, and that certainly would be a
concern.
Mr. Budd. Thank you. Gentlemen, do you care to comment on
what is working and how you would ask Congress to focus on this
front?
Mr. Novy. From the Secret Service standpoint, we are--our
area is not terrorism or counterterrorism, but the--what we see
is though, is that on the criminal side with the exploitation
of digital currency to move forward their crimes, we know that
terrorists look to gain education from how other criminals are
doing things. And so, how other criminals are moving money, and
then they can learn from that. So from my expertise, I see it
going, as I see it rising in criminal activity, I would assume,
that, at some point, the terrorists will start learning from
the criminals.
Mr. Budd. Good.
Mr. Ott. From FinCEN's perspective, I would just mention
that we work very closely in partnership with the financial
institutions in terms of our outreach and we see, have seen
from 2016 to 2017, a 90 percent increase in the BSA filings
involving some type of cryptocurrency across the variety of
criminal activities, whether that is terrorist financing,
narcotics trafficking, money laundering, or other illicit
activities. So to that extent, we are very pleased with the
increase of the type of law enforcement intelligence that we
can share with our counterparts.
Mr. Budd. Thank you all for this, a little bit different
type of a question, but I would like to get law enforcement's
perspective on this, and it is a hot topic right now especially
here in D.C. as we look at this as legislators, but how should
we classify virtual currencies? Is it a security, is a
commodity, another form of property? And what is the
appropriate framework for us to use to work on legislation
addressing virtual currencies?
Mr. Ott. Thank you, Congressman. I think--from again, from
FinCEN's perspective, we certainly recognize that this is a
complex area, we focus on money transmissions, specifically. So
our concern is the transmission of either currency, finds, or
what we say is a subset--of other value that substitutes for
currency. And we have said that in our guidance and in our
legislation that the current virtual currency is also included
in that definition of other value, that substitutes for
currency.
So we feel that certain regulatory regime right now, that
we have in place, is sufficient to cover virtual currency, and
to be--provide the correct reporting. And I would also say that
that applies to whether or not an MSP or a money transmitter is
located within the continental United States or outside the
United States, but does substantial, either substantial
business within the United States or other.
Mr. Budd. My time has expired, I yield back.
Chairman Pearce. The Chair would now recognize the
gentleman from Georgia. Mr. Scott for 5 minutes.
Mr. Scott. Thank you, Mr. Chairman. I am sitting here and I
am absolutely amazed. You all are sitting here and just
seemingly unknowledgeable about one of the greatest tragedies
that we are faced with, with the treatment of these little
children at the borders.
Now, Mr. Nevano, several Members have asked you, and
questioned you, and reminded you that you do have
responsibility here, you keep saying, you don't. Your entity
deals with MS-13s, the gangs, the drug cartels, all of the very
reasons that we got in this situation today. These people are
putting their children first. I looked up there, I saw this
picture of this little girl, I wish they would put it back up
there at the truck and she is looking up, and you know what I
saw from that?
I said what the Lord said, ``Suffer the little children to
come unto me: for of such is the kingdom of God.'' If you
really understand that scripture is it because people were
trying to push this one up to see, that one up, but He said no,
it is the children who come first, that is why this Nation is
crying out to stop this meanness.
There is the picture right there, look at it, Mr. Nevano,
there it is right there, would you mind? That is the image of
the United States of America, we have to stop it now. If you
can't give information to us, you are the representatives of
this Administration, that ain't the Democrats causing this, it
is President Trump, and take a message back to him. That the
Lord said, ``First, suffer the children to come unto me: for of
such is the kingdom of God.''
That is the scripture that they should be admonishing. Tell
me, Mr. Nevano, when was the first tolerance, the zero
tolerance policy first put into place?
Mr. Nevano. Congressman, I am not specifically aware of
when it was put in place, my recollection from hearing it in
the news was maybe sometime around April.
Mr. Scott. How many children have been reunited since the
zero policy has been put in place?
Mr. Nevano. Again, I do not work in that directorate, so I
do not have that information.
Mr. Scott. And you can see from the pictures there, that
most have not been reunited. What is going to happen to these
children? How many people who legally entered this country to
seek asylum have been detained as a result of this policy?
Mr. Nevano. Again, I do not have those numbers with me.
Mr. Scott. How many children separated from their families
on the U.S.-Mexican border have had to enter the foster homes?
The foster care as a result of this Administration's decision?
Mr. Nevano. I do not have that information.
Mr. Scott. Yes. How many children may never see their
mothers or their families again because of what this
Administration has decided to do on the borders? Think about
it.
I am telling you, man. We have to stop this. If there's any
message to take back to the White House, tell them to stop it.
This country has been blessed by God. Divine intervention is
throughout our history, from the soldiers at Valley Forge, to
those who went to Montezuma fighting. We are the beacon of
hope, liberty, freedom of the world. The little girl on these
pictures looking up, that ain't America. Please, will you take
that message back to the President?
Chairman Pearce. The gentleman's time has expired. The
Chair would now recognize Mr. Crist for 5 minutes.
Mr. Crist. Thank you, Mr. Chairman. I just have a few
questions for you, Mr. Nevano. How many children have been
separated from their families since the Trump Administration
announced the zero tolerance policy on April 6, 2018?
Mr. Nevano. I don't have that information. I am happy to
take it back for the record, and see if our enforcement removal
or our other component within DHS can get that information for
you.
Mr. Crist. Thank you. And I will provide these for you
before you leave. What is the plan to reunite the children with
their parents?
Mr. Nevano. Again, I don't--I am not involved in the
policymaking on that side of the enforcement house, I don't
have that information, but, again, I am happy to take that back
for the record.
Mr. Crist. Physically, where is your office?
Mr. Nevano. It is located at 12th & D Streets, sir.
Mr. Crist. And your colleagues there, have you had any
conversations about what is all over the news for the past 72
or so hours? Any concern about it?
Mr. Nevano. I watch the news every morning like everyone
else, and obviously see what is going on, but it is not a topic
of conversation within my directorate, because, again, we are
not involved in that activity.
Mr. Crist. Nobody there has talked about this?
Mr. Nevano. Absolutely, it is on the news, everyone is
watching it, but it is not a conversation that I have. I was
here to prepare for virtual currency and that is how I spent my
past week or so preparing for this hearing on virtual currency.
Mr. Crist. You have dedicated your life, it sounds like to
appropriate law enforcement?
Mr. Nevano. Twenty-seven years, I have.
Mr. Crist. Do you think this is the right kind of law
enforcement for the United States of America?
Mr. Nevano. Again, I am not here to give my opinion, I am a
sworn law enforcement officer, that I was sworn to defend the
laws of the United States, but I am not here to comment on my
personal situations, I am happy to take any questions you may
have, but--
Mr. Crist. I am not asking about your personal situation, I
am just asking your opinion, sir.
Mr. Nevano. I don't have an opinion on that, sir.
Mr. Crist. OK, that is interesting. You have no opinion on
this?
Mr. Nevano. I have an opinion on what my job is and what I
am required to do and--
Mr. Crist. No, I am talking about what we are talking
about.
Mr. Nevano. Congressman, anyone who looks at that picture
obviously would have concerns looking at that picture. I faced
several of these situations in my career as an immigration
inspector, and what I--what I have done is if I was directed to
do something, I would do what the direction of the--my
superiors in my Administration told me what to do.
Mr. Crist. Even if you felt it was wrong?
Mr. Nevano. That is my job, I swore on the oath to uphold
the Constitution of the United States.
Mr. Crist. But what if it is not a constitutional act they
are asking you to do?
Mr. Nevano. It may be a directive that we are following
that is from our leadership, and that is what I do on a day-to-
day basis, if I get direction from my leadership, I follow what
my leadership's directives are.
Mr. Crist. Follow right or wrong?
Mr. Nevano. It is not my decision to make, Congressman.
Mr. Crist. Yes, it is. Yes, you are a citizen of this
country, you don't have to do everything you are told to do if
you think it is wrong and immoral.
Mr. Nevano. If there was something that was immorally
correct or is not legal, then obviously I would not do that.
But--
Mr. Crist. I am glad to hear that.
Mr. Nevano. Yes, absolutely. I have 27 years, and I have
been doing my job for 27 years, I am a family member,
obviously, situations like that when you see that, touch
everyone's heart, but, again, we are not the ones to blame for
this situation, meaning me as a special agent within my
Homeland Security directorate, if laws need to be changed, they
need to be changed, but it is not me to make the change in the
law.
Mr. Crist. I am not blaming you. I didn't say that. Who do
you think is to blame for this?
Mr. Nevano. I think obviously the laws need to be changed,
I am not here to say who is responsible for it, but if the laws
need to be changed, it is not for me as a deputy assistant
director, at my level, to be making those changes.
Mr. Crist. Do you know if any children have been physically
harmed or died while in this custody since April?
Mr. Nevano. That I am not sure about.
Mr. Crist. Can you find out?
Mr. Nevano. I am happy to take any questions you have and
get it to the appropriate locations within the Department of
Homeland Security.
Mr. Crist. Thank you for your help.
Chairman Pearce. The Chair would now recognize Mr. Heck for
5 minutes.
Mr. Heck. Thank you, Mr. Chairman, thanks to all the
witnesses for being here today. I am not sure who can answer
this question, anybody that has the answer I would appreciate.
How long is the list of mothers with young children who have
been detained at the border are suspected or known to have used
cryptocurrency for illicit purposes?
Mr. Nevano. I am not aware of that.
Mr. Heck. Any? So we can at least eliminate that category
of reason to be afraid of young mothers with young children?
Mr. Nevano, you have had a distinguished career, and I
sincerely thank you for that at ICE. I would like to ask you if
you believe that the current resources provided ICE and the
staffing levels that result therefrom are 100 percent
sufficient for the agency to fulfill its mission in a robust
fashion?
Mr. Nevano. Congressman, we have plus or minus 6,500
special agents within the Homeland Security Investigations, we
could obviously use more--
Mr. Heck. No, sir. I asked about agency overall, drawing
upon your 27 years, the question is very straightforward, does
the agency overall, from where you sit, based on your 27 years
of experience, have 100 percent of the resources and staffing
it needs in order to fulfill its mission in a robust fashion?
Mr. Nevano. Again, I am familiar with my directorate which
is Homeland Security Investigations, I am not familiar with the
other components within DHS, there are over 22 components
within DHS, I am not familiar with every other component.
Mr. Heck. Is it your impression you have all the staffing
and resources you need?
Mr. Nevano. Within Homeland Security Investigations, we
could certainly use more.
Mr. Heck. So, if that is also true, if the other divisions
at ICE, we can reasonably and logically conclude that if they
were asked to do anything additional, it would only come of the
compromise or result in a compromise of their effort to fulfill
their mission?
There is a Federal prison, Mr. Nevano, in Victorville,
California where we now have about a thousand ICE detainees. Do
you know whether or not the guards there have been trained to
deal with the non-criminal occupants and immigrants at that
facility?
Mr. Nevano. No, I am not, Congressman, I am not aware.
Mr. Heck. Do you know whether or not the immigrant
detainees are being accorded the same rights and privileges as
the prisoners, violators of crimes, such as visitation and
access to counsel and recreational opportunities?
Mr. Nevano. I am not familiar with the situation in that
facility.
Mr. Heck. I have a facility in my district that is called
the Selma Carson Home which 16- and 17-year-old unaccompanied
boys are kept, do you know if the current population includes
anyone that has been separated from their parent?
Mr. Nevano. I do not.
Mr. Heck. I guess I would like to make an observation if I
may about this overall issue, because the truth of the matter
is, I completely understand somebody that is deeply concerned
about our Nation's security in general, and as it even relates
to some degree with respect to borders.
What is difficult for me to understand is the obsession on
just one border, and the obsession on only one fix to the issue
there. I guess I can't forget the fact that a goodly number of
the people who helped plot and implement the 9/11 attack on our
soil, the deadliest in our Nation's history, came in through
the northern border, not a lot of talk about enhanced northern
border security. And I am very mindful of the fact that nearly
50 percent of the people who are here without the appropriate
documents came in legally and just stayed.
And yet, all the focus seems to be on one of our four
borders, the water on our east and west take care of that,
nothing on the north for all practical purposes, nothing on the
way the people who come here legally but stay.
I guess, in simpler terms, this strikes me as if somebody
owned a home and they felt that they had a security risk of
being robbed, they decide to build two walls, not four, two, in
order to protect themselves, or even one wall, leaving the
other two or three open. I guess that would be one way to try
to protect themselves, not very effective, or they could buy an
alarm system, or they could put up increase lighting, or they
could trim the bushes that provide cover for people, or they
could buy a dog, or, my point being, that the issue of security
has to be solved intelligently. Not just with a half-baked,
half idea on how to provide for our Nation's security. Thank
you, Mr. Chairman, and I yield back.
Chairman Pearce. The gentleman's time has expired. The
Chair would now recognize Mr. Capuano for 5 minutes.
Mr. Capuano. Thank you, Mr. Chairman. Thank you gentlemen
for being here. And honestly, I was looking forward to having a
hearing on the subject matter that was advertised, but with
today's crisis I assume by now you have figured out we just
can't do that. We can't remain silent.
Mr. Nevano, I see you have an excellent education, I am a
B.C. guy, too. My son as well. I don't remember being taught by
any of the Jesuits it was OK to separate parents from children,
and I want to be real clear, you have been incredibly
professional under some tough questionings, and I respect your
position, and I am not going to try to make you, put you in a
tough position, because I think you have done a good job today
defending the indefensible or actually avoiding defending the
indefensible. And I really do, I appreciate what you are doing,
and I don't want to put you in a tough position.
But, you are the guy who is here, you are the guy we got,
and I am sorry, but is there anybody behind you who can answer
the questions that have been asked today? I don't know,
something, anybody else from ICE who are here that can answer
these questions?
Mr. Nevano. I don't believe there is anybody with me here
today from Customs and Border Protection Enforcement and
Removal operations that may have some of those answers to your
question.
Mr. Capuano. OK. I expected that. I know you have heard the
audio before, but I want to play that audio just one more time,
because I do have a question related to it. I don't know
exactly all this technology stuff, but there's a guy in the
backroom doing some magic, so.
[Audio recording played.]
Mr. Capuano. I think that's enough, I think that is all we
need. I don't know. I appreciate it, thank you. Did you hear
any MS-13 members in that audio?
Mr. Nevano. I did not.
Mr. Capuano. I didn't either. Any other gang members that
you could tell that secret code that we could tell that these
children were somehow associated with an international gang
that came here to terrorize us?
Mr. Nevano. I did not.
Mr. Capuano. No, I didn't either. So, it was interesting
that the President was able to hear that. I don't know, I know
you have been testifying for a while, I don't know if you are
caught up on the news, you probably not, but if you--it has
been announced the President has just signed an order reversing
his previous order. So, do you--I assume your agency is going
to get some new orders.
But I am interested, I just heard the last 3 days, the
President of the United States telling me repeatedly on the
news, very publicly that he didn't have the authority to change
his own zero tolerance policy, and now he has done it. Could
you explain to me how the President could say on, for 3, 4, or
5 days in a row we didn't have the authority, and now somehow
have the authority?
Is anybody at ICE going to ask questions as to who actually
has the authority to make a determination whether children can
be ripped from the arms of their mother?
Mr. Nevano. I don't have that answer for you today, sir.
Mr. Capuano. No, I am just--I am just curious, because it
strikes me, if the President says for day, after day, after day
on T.V. that he doesn't have the authority and then now he
does. I don't know, but I am just guessing that if that was
somebody else that he didn't like that the President would say
that person was lying, and has been lying for day, after day,
after day.
I am just--I am just confused how the President can do
that. And I know that, again, I know that you are going to
carry out the orders, and I respect that, I really do, I
respect that. But at some point, somebody at DHS, somebody at
ICE is going to have to look in the mirror and ask themselves
whether they want to keep doing this. Are you from Mass or just
were lucky enough to go to B.C.?
Mr. Nevano. No, I am from Massachusetts.
Mr. Capuano. And you--do you remember the name Elliot
Richardson? Our former State Attorney General who became the
U.S. Attorney General?
Mr. Nevano. I am familiar with that name.
Mr. Capuano. Elliot Richardson quit. When the President of
the United States ordered him to take action he found to be
immoral, he quit his job. Now, I am not asking any line guy,
27-year-career guy to do that. That is a little much. But
somebody somewhere at DHS and ICE, at some point, is going to
have to ask themselves, when is it too much? When are the
orders too much? I can't do them.
And, again, I am not suggesting it should be you or anybody
in particular, and I really hate even putting that question to
a career guy. I really would rather put that question to a
political appointee, that would be people above your pay grade,
and I get it, but again, and I apologize as I did earlier. I
have to say some of these things to you, I don't really mean to
direct them to you, you seem like a nice guy doing your job.
But until and unless we have access during a public forum
to the people that can answer these questions, and can make
those decisions, unfortunately you are stuck in. And I actually
feel bad that your superiors put you in this position today to
have to take this abuse. And I--and again, it is not directed
to you, but I would be very clear, it is unequivocally directed
to your superiors who do have the authority to say no, and
should have said no to this policy. Thank you, Mr. Chairman.
Chairman Pearce. The gentleman's time has expired. I would
like to thank our witnesses for your testimony today. The Chair
notes that some Members may have additional questions for this
panel, which they may wish to submit in writing. Without
objection, the hearing record will remain open for 5
legislative days for Members to submit written questions to
these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is adjourned.
[Whereupon, at 3:43 p.m., the subcommittee was adjourned.]
A P P E N D I X
June 20, 2018
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